Housing: Right Back Where We Started

With all the gloom and doom in the present conversation about the national housing market, you’d think we were recovering from a complete financial meltdown instead of the expiration of the first-time homebuyer’s tax credit.

Funny coincidence about that—these days, it seems like everyone, from the analysts to the big builders, is talking about how July 2010 looks a whole lot like April 2009, when the market was just emerging from the darkest days of the financial meltdown.

This morning, the National Association of Home Builders/Wells Fargo Housing Market Index- a monthly yardstick for investors and market-watchers that gauges whether CEOs of homebuilding companies are feeling like raising a glass of champagne or downing a stiff drink–showed that builder confidence in the market had fallen to its lowest level since April of last year.

“The pause in sales following expiration of the home buyer tax credits is turning out to be longer than anticipated due to the sluggish pace of improvement in the rest of the economy,” explained the NAHB’s chief economist, in a statement.

But the NAHB also predicts an uptick in demand for the second half of the year, with new-home sales improving 10% in 2010, compared to 2009. That’s pretty ambitious, considering month-by-month new home sales plummeted 30% in May.

David I. Goldberg, an analyst with UBS, sent out a note Monday that pretty much says the same thing. “We continue to believe fundamentals in the housing market are approaching a trough,” Mr. Goldberg wrote, adding that towards the end of 2010, we should see signs of a gradual recovery.

But perhaps most tellingly, the builders themselves are saying sobering things about the market and parroting the message that if good news is in the offing, it will come slowly, and after a substantial wait.

“It’s not back to the darkest days post-Lehman, which really went from September 2008 to late March 2009, but the momentum that was starting has stalled a bit,” said Fred Cooper, a vice president at Toll Brothers Inc., in a recent interview.

That’s coming from a guy who works at the company that Mr. Goldberg, the UBS analyst, recently said is the top dog in the industry. Toll recently entered into an investment partnership with a large national private equity firm and its stock is buoyed by 17 neutral-to-positive analyst ratings, compared to just one “underperform” tag.

When the guys who by all rights should have the rosiest view of the market think things are stalling, maybe it’s time to take another look.